Research On Cause And Consequence Of Audit Failure Of BDO China

In the past two years,firm audit failure events happens more and more frequently.And the amount of enterprise financial fraud totally refresh the public cognition.According to the securities and futures commission report,Jinya technology cheated in the 2014 annual financial report because of it’s financial fraud.And the fraud amount is striking.Lixin accounting firm,which is the one of the most famous accounting firm in China and providing audit and other audit related services for Jinya technology for the past nine years,did not found Jinya’s mistake.We hope that by studying the Lixin firm audit failure case,can help the better development of the auditing profession and firm.First of all,we review and summarize the related theory and research of domestic and foreign scholars about audit failure.And then we use comparative analysis and induction to explore the causes and effects of audit failure,which is starting from the professional competence to independence,and from headquarter in Lixin accounting firm to Lixin accounting firm branch office in Shen Zhen,as well as specific signature CPA three levels,.On the one hand,this article specifically analyse the audit experience of Lixin accounting firm headquarter and branch office in Shen Zhen and signature CPA.On the other hand,we also analyse the industry market share and audit fees.And we also compare audit term of Lixin with the industry average audit term to explore the deep reason of audit failure in this case.At the same time,from the perspective of audit failure,we try to figure out the influence of the customers and audit fee and audit quality before and after failure,and analyzed the influence of audit failure on firm headquarter and branch offices.After studying and analysing this case,we find that lack of independence of firmsand certified public accountants is the key factor of audit failure,which makes the independent audit can’t play their oversight role.And we also found that the audit failure did not have economic consequences for firms,and didn’t increase the firm’s audit quality.Finally,we also try to provides some suggestions on prevention of audit failure to firms and certified public accountants.Through this case study,we hope that it can be able to give firms and auditors alarm which push them learn from some experience and keep on learning in the audit work.And push them maintaining independence,at the same time,also improve their professional competence.